Diversifying does not mean owning many things: it means owning things that do not fail at the same time. Ten shares in the same bank diversify nothing; a global fund holding three thousand companies across forty countries does.
Diversification does not raise expected return. What it does is reduce the chance of a catastrophic outcome, and that matters because a 100% loss in one position is not recovered by a 100% gain in another. It is insurance against being wrong, and everyone is wrong sometimes.
The extreme case is the concentration risk almost nobody counts: if your salary, your shares and your pension all depend on the same employer, you hold a one-asset portfolio under three different names.